Global canola prices expected to fall as supplies of oilseeds rise

Agricultural commodities analysts are expecting the price of canola to drop in coming months with larger crops of oilseeds to be harvested.

Western Australian grain producers are currently preparing for seeding, with the oil seed fetching around a $250 per tonne premium over the highest quality wheat it's expected lots of growers will opt for large canola plantings.

Since December last year canola has traded in a range between $580 to $560 a tonne and just this week the price has dropped to $530 per tonne ex Kwinana.

However Profarmer commodity analyst Angus Thornton expects that price to head further south, but can not say by how much.

"Not until the global market (and as a result the local market) really get a gauge on how many oilseeds are going to be coming online this year," Mr Thornton said.

Australian canola competes with other oilseeds including soybeans Mr Thornton said with a few large South American crops recently harvested there is a lot of oilseed around.

"It is believed that all key south American soybean producing countries, except Argentina will produce their largest crop on record.

"So that is obviously meaning that there is a lot of stock that is able to find its way into export markets."

At the end of this month the United States Department of Agriculture (USDA) will release a report on its planting intention survey completed by US growers.

With wheat and corn prices subdued it is expected soybeans will be favoured.

"This year US spring crop growers, when they are making the choice between wheat, corn and soybeans at this point it seems that as though soybeans will be the more profitable options for a large number of growers.

"So ... Australian canola is competing and there is certainly a reasonable amount of downside," Mr Thornton said.

South Australian agricultural economist and grains consultant Robert Rees said the current canola price is higher than it should be and growers should consider forward selling part of this year's crop now.

"I would be locking that price in, either taking out forward contracts or similarly if they know their cost of production, I would be looking at taking out a put option," Mr Rees said.

"It is (a type of) insurance contract which you can get through any broker or most banks."

"It might cost them anywhere between $15 to $25 a tonne depending on what level of risk they are prepared to take on."

"If the price falls then all it costs you is your insurance premium," he said.

Canola disease considerations

Significant rain over the summer has the Western Australian Department of Agriculture and Food on alert for canola fungal diseases including Sclerotinia and Blackleg.

"We also had a lot of Sclerotinia last year, so as a result there is quite a lot of inoculum in the paddocks already so growers really need to be really vigilant and refer to all of the black leg and Sclerotinia management guides and they should use appropriate control measures."

Don't write-off wheat

Despite record low wheat prices Robert Rees says the coming year is likely to bring opportunities to secure good prices.

"Don't write wheat off, for a number of reasons; right now the price is falling because it is raining in the hard red winter wheat areas of the United States."

"But there are eight major exporters and if you have a look at what happened last year one exporter failed, that was the European union, everyone else including Australia all had record crops, that is not likely to happen again." Mr Rees said

He said many of those major wheat producing nations will plant a smaller crop this year and despite huge stocks of grain there will be variation in the market.

"Countries like Ukraine and Russia are quite volatile in terms of the yield and June-July are the most critical months for those two countries."

"If they have their normal volatility that will create spikes in the wheat price and that will give growers an opportunity to lock-in some forward contracts at prices higher than they are at the moment," he said.

A GERMAN breakthrough may create market opportunities for rapeseed / canola meal, the byproduct of the oil making process. At present, rapeseed / canola meal is well regarded as a stockfeed, with high levels of protein, but due to bitter compounds it is not palatable for humans.

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